Defending the Study and Practice of Local Energy Transitions

Introduction

When suggesting the possibility of domestic municipalities leading their own energy transitions, skepticism occasionally arises. [1] Scholars writing on climate policy and environmental law cite a lack of local resources, shortcomings in climate action planning, and the nesting of cities within the confines of state and federal authority as barriers to substantive local action on energy issues. [2] Municipalities in the United States, however, maintain certain capacities — like the power to municipalize their electricity systems — that can help a city achieve a net-zero transition. Given these authorities, this article argues that cities can pursue local energy transitions, and that the study of these processes merits continued scholarly attention. The case study of municipalization is employed to demonstrate a practical justification for localized transition activity and scholarship.

The article begins by defining an energy transition and exploring some of the theoretical justifications for pursuing local transitions (see: “Articulating an Energy Transition”). Then, the paper provides relevant regulatory information related to the U.S. electricity sector (see: “Understanding Electricity Regulation in the United States”), so as to contextualize the following discussion on a practical strategy for implementing local decarbonization initiatives (see: “Municipalization: A Mechanism for Municipalities”). Finally, the author concludes with remarks that expand on the central argument of this paper: that local communities can and must work towards decarbonized, climate-friendly futures.

Articulating an Energy Transition

A clean energy transition — alternatively called a net-zero or low carbon transition — achieves “a shift from high-carbon energy sources such as oil, gas and coal to low-carbon and zero carbon sources such as renewables.” [3] Thomas et al. (2022), a leading Canadian research team on the politics of energy transitions, states that an energy transition involves “transitioning from the production and use of fossil fuels to more renewable and sustainable sources of energy.” [4] Ju-Ying Yang and Jennifer Dodge (2024), American professors of public administration, build on Thomas et al.’s definition by adding that net-zero transitions should occur “while avoiding negative feedback loops and sustaining renewable energy purchases during future critical junctures.” [5] Using these explanations as guidance, this paper defines an energy transition as a fundamental, multi-sectoral shift in both the consumption and production of energy towards a sustainably and permanently decarbonized energy system.

With this definition in mind, two of the theoretical justifications for pursuing a local net-zero energy transition may now be explored. The first of such arguments cites a municipality’s ability to overcome national and transnational inertia as a reason for pursuing local decarbonization efforts. The May 2014 edition of Urban Studies dedicates extensive time to this argument. In their introduction to the volume, Rutherford and Coutard (2014) state that “cities may have a window of opportunity for action on energy transitions by their distinctive…political and/or socio-technical contexts compared with those at a national level,” which may suffer from “the inertias of government and party politics.” [6] The increased political polarization occurring within the United States — which certainly slows the pace of federal climate action — suggests that localized measures become increasingly relevant in addressing the climate crisis. Cyria Emelianoff’s (2014) installment in the issue chronicles the capability of cities to pursue climate targets amidst “strong economic lobbies [that] were blocking national and international climate policies.” [7] Cities in the United States do not confront the same degree of lobbyist and financial opposition to climate measures proposed at the national and state level. These findings in the Urban Studies issue rightly suggest that local energy transitions demand continued attention from both scholars and practitioners, who now confront an increasingly hostile policy environment at the federal level. In some contexts — such as in the author’s state of residence, Oklahoma — local policy presents the only realistic platform for addressing climate change. Accordingly, scholars must continue to evaluate and develop local climate policy, including local energy transition programs.

Local energy transitions also merit attention because communities possess relevant authorities over transportation and land use, two areas of governance that greatly influence U.S. emissions. [8] Localized policy action in these sectors can therefore contribute to national decarbonization objectives, further demonstrating the relevancy of local transitions and research on such transitions. Municipalities also maintain some authority over their electricity systems and can employ several strategies to assert greater control. Discussion of one such strategy comprises the latter portion of this paper (see: “Municipalization”). First, though, the regulatory context for U.S. electricity markets must be understood.

Understanding Electricity Regulation in the U.S.

The structure of federal and state energy governance informs the capacity of municipalities to pursue local energy transitions. For the purposes of this paper, only two types of power markets will be discussed: retail and wholesale electricity markets. Retail electricity markets involve the transactions that occur between consumers and their electric utilities. Wholesale markets, on the other hand, involve transactions between retail electric utilities and electricity generators. [9] Independent systems operators (ISOs), including regional transmission organizations (RTOs), oversee the operation of wholesale — but not retail — markets. [10] Since many ISOs/RTOs encompass multiple states, the transactions occurring in such markets fall under the jurisdiction of the Federal Energy Regulatory Commission (FERC). [11] The 2005 Energy Policy Act designated FERC as the primary authority over interstate wholesale markets and transmission construction. [12] State-level public utility commissions (PUCs) generally perform a similar function within intrastate retail electricity markets, while also overseeing the construction and planning of generation facilities. [13]

The need for rapid decarbonization of the electric grid calls into question the emphasis on concentrating electricity authority in the hands of state and federal regulators. Municipalities need greater power over their energy systems. This need is especially critical in communities that possess different energy-related priorities than those of their state. Although cities certainly require more codified powers, municipalities already possess underutilized statutory authorities that can help them gain greater autonomy. The existence of one such power — the power to municipalize — drives the focus of the following section (“Municipalization”). In exploring this power, the article provides a practical justification for the continued study and application of local energy transitions.

Municipalization: A Mechanism for Municipalities

The municipalization of local electricity systems involves wresting control of a city’s energy supply away from the incumbent utility. Cities then go on to create their own “self-regulating electric utilities.” [14] While every state except Hawaii [15] explicitly authorizes the creation of a municipal electric utility, the process of forming such an entity remains arduous. [16] Many states require that cities pursue a successful public referendum after completing a feasibility study; some also mandate that the state’s PUC approve the transfer of power from private to public ownership. [17] Should a city clear these considerable hurdles, the locality may need to exercise their “eminent domain authority” [18] to gain control of the incumbent utility’s assets. Such processes often incite fierce opposition from the incumbent utility and require significant expenditures from the implementing city.

Despite the procedural challenges of municipalization, cities acquire considerable autonomy in determining their energy future if such an action is pursued. An independent governing board — or, in select cases, the city council — sets retail rates and establishes operational objectives, including “energy efficiency mandates, renewable energy requirements, and targets for…local generation or the phasing out of coal-fired power.” [19] Under the Inflation Reduction Act, tax-exempt entities like municipal utilities can benefit from clean energy tax credits through direct pay, thereby increasing the feasibility of pursuing local generation options. [20] Additionally, the Federal Power Act explicitly excludes municipal utilities from FERC regulation, and many states exempt municipal utilities from PUC oversight. [21] The autonomy granted to cities through the formation of a municipal utility suggests that municipalization should be pursued with greater frequency.

Common law precedent further bolsters the self-regulating capacity of municipal utilities, although ambiguities still exist. In Hunter v. City of Pittsburgh (1907), the Supreme Court declared that “municipal corporations are political subdivisions of the state,” giving the states “absolute power” over the property of such entities owned for governmental purposes. [22] However, when the municipal corporation owns property pursuant to its private capacity — as a municipal utility does in owning electricity infrastructure — the legislature does not maintain absolute authority over such possessions. [23] The Court’s ruling, however, does not precisely answer the question of whether private property owned by a municipal corporation may be taken against the will of the corporation without compensation from the state. [24] This issue remains unresolved by the Court, adding another element of uncertainty to the process of municipalization for cities that encounter opposition at the state level.

In future cases, the Court should rule in favor of the municipal corporation, as municipal corporations serve the public interest. Springfield Gas & Electric Co. (1921) established this principle, stating when municipal corporations act in their proprietary capacity, “they are acting in the public interest, providing a separate justification for their freedom from state control.” [25] This reasoning provides a framework for the Court to side with a municipal corporation in the event that the state attempts to take private property from said corporation.

Even if municipalization efforts fail, movements towards public ownership may still offer significant benefits to localities. For example, cities can use the threat of municipalization when negotiating franchise agreements with private utilities to increase the amount of clean electricity they receive. Additionally, municipal willpower for decarbonization can motivate state and federal action, supporting a municipality’s climate ambitions. These benefits suggest that municipalities should continue to work towards their own decarbonized futures.

Conclusions

Theoretically, local energy transitions can and should be practiced by communities for two primary reasons. First, state and national climate action often encounters partisan gridlock that prevents policy implementation. Localities typically do not face these same constraints and can therefore implement measures aimed at reducing emissions. Second, local communities possess several relevant authorities over sectors that greatly impact a city’s overall emissions. For instance, cities can create regulations concerning transportation and land use. Cities also possess some inherent control over their electricity systems and may choose to assert greater authority through the mechanisms depicted in this paper.

The practical justifications for local energy transitions originate in the strategies that allow cities to implement such transitions. This paper focuses specifically on local electricity decarbonization, as energy law tends to underestimate the capacity of localities to exercise power over this sector. Several strategies — including municipalization, as discussed in this article — allow localities to obtain considerable control over their electricity systems, thereby permitting the pursuit of local decarbonization. This article does not suggest that municipal action can replace state and federal decarbonization initiatives. Rather, the author intended to bring critical consideration to the practical role of municipalities in determining their own energy futures, as such considerations are especially relevant given the extreme partisan divides characterizing state and federal politics. The possession of the power to municipalize, along with other local authorities discussed in this paper, affirms that cities can and must step up in the fight against climate change through local decarbonization efforts.

Bibliography

[1] This assertion is derived from the author’s conversations with three FERC attorneys and two private practice energy lawyers.

[2] See, for example: Janet Stanley and Michael Spencer, “Wither Adaptation Action,” Climate 13, no. 3 (2025); Mathew Cohen et al., “A review of U.S. city climate action plans,” Climatic Change 178 (2025); Amy Turner and Michael Burger, “Cities Climate Law: A Legal Framework for Local Action in the U.S.,” Columbia Law School Sabin Center for Climate Change Law (2021): 4; Kate Urwin and Andrew Jordan, “Does public policy support or undermine climate change adaptation? Exploring policy interplay across different scales of governance,” Global Environmental Change 18, no. 1 (2008); Zhenghong Tang et al., “Moving from agenda to action: Evaluating local climate change action plans,” Journal of Environmental Planning and Management 53, no. 1 (2010).

[3] Anna Zinecker et al., “Just Energy Transitions—Action Needed for People and the Climate” in Real People, Real Change: Strategies for Just Energy Transitions, IISD (2018): 2.

[4] Melanee Thomas et al., “Great expectations: Public opinion about energy transition,” Energy Policy 162 (2022).

[5] Ju-Ying Yang and Jennifer Dodge, “Local energy transitions as process: How contract management problems stymie a city’s sustainable transition to renewable energy,” Energy Policy 184 (2024).

[6] Jonathan Rutheford and Olivier Coutard, “Urban Energy Transitions: Places, Processes and Politics of Socio-Technical Change,” Urban Studies 51, no. 7 (2014): 1369.

[7] Cyria Emelianoff, “Local Energy Transition and Multilevel Climate Governance: The Contrasted Experiences of Two Pioneer Cities (Hanover, Germany, and Växjö, Sweden),” Urban Studies 51, no. 7 (2014): 1380.

[8] “Sources of Greenhouse Gas Emissions,” U.S. Environmental Protection Agency (EPA), 2023.

[9] Kathryne Cleary and Karen Palmer, “US Electricity Markets 101,” Resources for the Future, last modified March 17, 2022, https://www.rff.org/publications/explainers/us-electricity-markets-101/.

[10] Ibid.

[11] Ibid.

[12] James McBride and Anshu Siripurapu, “How Does the U.S. Power Grid Work?” Council on Foreign Relations, last modified July 5, 2022, https://www.cfr.org/backgrounder/how-does-us-power-grid-work.

[13] “Electricity 101,” DOE Office of Electricity, https://www.energy.gov/oe/electricity-101.

[14] Alexandra Klass and Rebecca Wilton, “Local Power,” Vanderbilt L.R. 75:1 (2022): 100.

[15] Hawaii does not mention municipalization in its laws and does not provide legal standing for municipalities to acquire investor-owned utilities, according to analysis prepared for the District of Columbia Department of Energy and Environment (Vitolo et al., “ An Analysis of Municipalization and Related Utility Practices, DC DOEE, 2017).

[16] Klass and Wilton, “Local Power,” 114.

[17] Shelley Welton, “Public Energy,” N.Y.U. L. Rev. 92 (2017): 305.

[18] Ibid.

[19] Ibid, 304.

[20] Rachel Chang, “Understanding Direct Pay and Transferability for Tax Credits in the Inflation Reduction Act,” Center for American Progress, June 5, 2023, https://www.americanprogress.org/article/understanding-direct-pay-and-transferability-for-tax-credits-in-the-inflation-reduction-act/.

[21] Klass and Wilton, “Local Power,” 118.

[22] Hunter v. City of Pittsburgh, 207 U.S. 161 (1907).

[23] Hunter, 207 U.S. 161 (1907); Klass and Wilton, “Local Power,” 113.

[24] Hunter v. City of Pittsburgh, 207 U.S. 161 (1907).

[25] Springfield Gas & Elec. Co. v. Springfield, 257 U.S. 66 (1921); Klass and Wilton, “Local Power,” 114.